Entain says MGM's $11B takeover bid "undervalues" the company

MGM Resorts International has made an £8.1 billion ($11.1 billion) takeover proposal to its joint-venture partner Entain (formerly known as GVC), which said the offer undervalues the business.

Ladbrokes owner Entain said in a statement Monday that it believed the offer, which represents a 22% premium over its closing price on December 31, "significantly undervalues" the company's shares and its prospects.

"The board has also asked [MGM] to provide additional information in respect of the strategic rationale for a combination of the two companies," Entain said. The UK company has received multiple proposals from MGM, its statement suggested. MGM was also willing to make a partial cash offer, Entain said. Entain shareholders would own 41.5% of the enlarged group.

Shares in Entain increased more than 26% on Monday, surging above the price per share offered by MGM in a sign that some investors expect another offer from the US company or another bidder, CNN reports. 

Under UK takeover law, MGM has until 1 February to either announce its firm intention to make an offer or to withdraw. MGM’s proposal is backed by billionaire mogul Barry Diller’s IAC group, according to the Wall Street Journal, which first reported the proposal on Sunday. It follows an earlier all-cash proposal worth about $10 billion that was also rejected, it said.

MGM and Entain are 50/50 joint owners of BetMGM, a sports betting and online gaming company that operates in more than a dozen US states. Entain, which owns brands including bwin, Coral, Eurobet, Ladbrokes and Sportingbet, operates both retail and online businesses.

Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said that he "can understand why MGM wants to take control" of Entain, given that the two companies are already working together on sports betting in the United States. But he cautioned that a higher price "may prove too much for MGM shareholders to swallow."